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Compound interest
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Learn it Compound interest earns interest on the interest. Each year multiply by $(1 + r)$: $A = P(1 + r)^t$. It grows faster than simple interest.
Example: $\$1{,}000$ at 10% compounded yearly for 3 years.
- Year 1: $1{,}000 \times 1.1 = 1{,}100$.
- Year 2: $1{,}100 \times 1.1 = 1{,}210$. Year 3: $1{,}331$.
- $\$1{,}331$ (simple interest would give only $\$1{,}300$).
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